Cambria Automobiles (LON:CAMB) has delivered a robust FY 2018 performance, in the context of a challenging new car market, which was ahead of our forecasts at the adjusted EPS level by +4.6%. We are maintaining our estimates on the back of these results, which we see as a positive outcome given market conditions. We also remain confident in the medium-term investment case, the company has a strong balance sheet with the successful addition of luxury brands and potentially more to come.
Final results: Cambria has delivered a FY adjusted PBT of £9.8m, which compares to our forecast of £9.5m and is -13.3% YOY. We see this as a strong performance in the context of a challenging market and operational disruption as sites were closed for re-development during the period. The franchise portfolio has been enhanced through the addition of three High Luxury Segment brands (McLaren, Bentley and Lamborghini), added to the portfolio with no goodwill. Interest costs were £0.3m higher than we forecast, which partially offset the outperformance against forecasts. Adjusted EPS was -14.7% YOY and 4.6% ahead of our forecast, with the dividend in line with our forecast of 1.0p which was flat YOY.
Key drivers: New vehicle revenue was -5.9% YOY, at £290.6m vs. £308.7m last year. This was a good performance in the context of a -17.1% drop in sales volumes. This was offset by a +1.2% increase in gross profit per unit, reflecting a strengthening mix from the business additions which sell at higher price points. Used revenue was up 1.1% YoY despite a 6.9% decline in the volume of units sold, which was partly driven by closures. The gross profit increased £1.1m in absolute terms to £24.6m, as the profit per unit increased 11.6%. Aftersales revenue increased by 1.5% to £72.5m or +4.1% on a LFL basis, with gross profit improving 5.7% to £26.8m, which was a £1.4m positive movement.
Forecasts: We leave our forecasts unchanged. Clearly trading headwinds remain across the sector and uncertainty is likely to continue into 2019. Supply challenges in new, political uncertainty in the UK and the impact of Brexit are all likely to be key drivers of the 2019E performance. We introduce our 2021E forecasts, building in a £0.3m growth in adj. PBT from 2020E levels. Based on our forecasts, the FCF yield builds to 15% – 16% by 2020E – 2021E as capex trends normalise under benign conditions following intense recent activity.
Valuation: While trading conditions clearly remain difficult, we remain confident in the Cambria story longer term, and believe it remains well positioned to deliver £1bn+ of revenue over the medium term. As we are seeing across the sector at present, near term valuation multiples are depressed, and the current market capitalisation of the Group remains at odds with the >£80m invested freehold asset base. Management are aligned with the shareholder base, with significant shareholdings, and are well positioned to continue to deliver value.
